All Forum Posts by: Stephen Fryer

Hi All.

Looking to leverage the collective experience of the forum. I have to replace the furnace on a duplex. Heating costs are presently covered by the landlord. What options are out there to buy two seperate units so that I can pass on the future monthly costs to my tenants. Would like to minimize costs as much as possible.

HI @David Goldberg. 

When your agent presents your offer to a seller and they accept, the two agents will split the commission which is normally paid by the seller. That's why @Joe Facenda suggests that it's a good idea to have a separate buyer agent to ensure that you are protected by someone who is supposedly looking out for your interests. 

In my experience using the listing agent has been a very successful strategy for me for several reasons. 

1. Is altruistic. When dealing with C type properties in the Midwest, I am often looking at deals that are being sold at less than $100K. Nobody is going to get rich on a $3K commission, but the amount of work that the agent has to put into the deal is exactly the same as if they are listing a $500K house. By giving them both sides of the commission I feel that I am rewarding the agent for their hard work.
2. Is selfish. The agent is motivated to get the deal done, because they have a greater financial interest with both sides of the commission. Whether we like to admit it or not, the agents are motivated by their financial self interest. 

@Joe Facenda. I respect the your opinion about the agent's inclination to talk up the deal to the buyer, but I am going into any negotiation taking anything that they say with a grain of salt. No disrespect to my agent friends, but I will defer to Ronald Reagan's comments during the SALT talks with the Russians. Trust but verify. When I have the property under contract I include a 15 day due diligence period and will walk the property with my property manager and will get a second opinion on the quality of the neighborhood, rental rates, vacancies etc. No good investor should ever be relying solely in the advice of an agent and should always do their due diligence before closing. 

Hi @Kathleen Lynn.

As an investor from out of country, I find it essential to find financial partners to help me keep my investing growing. Local American banks aren't too keen to lend to Canadians that invest in the US market. 

@Adam Norris. I have found several partners at my local REIA. I've taken every opportunity that I could to talk about progress and successes in order to build credibility. The REIAs are a great place to find like minded investors.

HI @David Goldberg.

I understand the desire of the agent to sign you to a contract. He is working hard on your behalf and wants to make certain that he gets something out of it. As @John Warren mentions, tire kickers are a hazard of the business for real estate agents.

One of the problems that I can see with signing an agreement like this is that you are limiting yourself by relying on one person. As an out of town (state/country) investor you want to reach out to as many people as you can and have them all thinking about you regularly. This won't happen if you are locked into one guy. 

Try this strategy:

1. Define your buying criteria - Beds, baths, sq. ft., location etc.

2. Go to Zillow and set up a search using that criteria. You will get referrals that match that criteria emailed to you daily.

3. Call/email the listing agent. If you want to see an agent work hard for you, give them an opportunity to earn both sides of the sale.

4. As @Joshua Dorkin advises, do 5 calls a day.

5. Going forward call/email/text each agent 1/month to ask them if they have any deals that match your buying criteria. Over time they will begin to remember you and if something comes up they will likely give you a call. Especially if you have closed a deal with them previously. That way you build credibility. 

I'm not saying that you should not continue to work with this agent, especially if you have a good relationship with him, but don't limit yourself. 

Good luck with your search.

Two years ago I found a woman on Bigger Pockets that had just put a property under contract. She couldn't close and needed capital. She and her son had a remediation business and were contractors, so they could do the work. I had an investor that lent the cash. A partnership was born and she and I split the profit on the fix and flip 50/50.

I went and found two other properties for fix and flips and a couple for buy and holds. I borrowed the funds from investors here in Ottawa and my partner was to conduct the rehabs. Little did I know, but her son developed a weakness for meth and drained my account to feed his habit. Now I had four properties, no money and investors asking questions.

In order to pay back the investors, I exhausted my HLOC. They didn't lend me money expecting that I would give them pennies on the dollar, so I paid them back every cent. I used the profits from 1 fix and flip to fund the other projects and slowly crawled out from under the mess.

I discovered that whatever doesn't kill you, makes you stronger. Now I have processes in place to ensure that future projects are properly managed and issues identified early. 

HI @Sean Yang.

Here's a suggestion that may work for you. Call the listing agent directly. Let them know that you are an investor looking to add a property to your portfolio. Engage them and get the details of the property yourself. During the conversation, let them know that you value hard work and you won't be bringing anyone else to the table on the transaction. This is important, as it tells them that they don't have to share the commission. Thank them for their help and tell them that you have to do your homework and you'll call them back with an offer. Get their contact information, including email address.

Run your numbers and determine your offer price. Once that's completed call them back with the offer and discuss. Don't rely on anyone else to do your work for you. You need to engage the agent and ask questions about the condition of the property, the motivation of the seller etc. If the property is cash flowing, in good condition and the seller is willing to wait, an offer of 80% of asking price may not get the job done (clearly market specific). If they are motivated however, for one reason or another, it may work. Always send the offer anyway. Like you said, its a conversation starter.

Set a reminder in your calendar to call the agent back. In my experience, there's value in the follow up. If the property hasn't sold, the seller may become more compliant. Nothing like time to change circumstances. This may mean calling multiple times. Even if you don't get the property, the good news is you're establishing a relationship with the listing agent and you'll be able to send them emails in the future to ask if they have any deals. Create a spreadsheet and build a list of agents like this and call/email them regularly. That's how you establish relationships. Its all about the relationships.

HI all.

I have 4 projects on the go right now and my contractor is not able to keep up. Can anyone refer a good GC that would be able to assume a new project now.

HI @Haseeb Awan.

This project was in South Bend IN. I love the midwest. I can still find value there. Both the Duplex and Tripex that I just bought should have a return around 18%.

I don't invest in Ottawa. I find it hard to cash flow. CAP rates for SFRs are between 3-5%. Too overvalued for my taste. Everything becomes an equity play. Too close to speculating rather than investing.

I have a classic transactional engineering story. While cruising BP Marketplace, I found a BP member who was a contractor that had put a property under contract but didn't have the money to close. I had a private lender that was willing to put up the cash, which I brought to the table. We rehabbed the property, paid back the lender and split the profit. No money out of pocket.

Hey @Andrew Bertram.   Interesting conversation.

I'm investing from a distance, so have no choice but to use a PM. I just make certain that I account for the expense when I am doing my initial analysis. My personal perspective is that PM is a good example of the difference between working "in" your business rather than "on" your business.

I agree with @Joe Villeneuve.   For those of us that are looking to create a scalable business, managing your own properties would be a low paying task that takes me away from doing more important things like speaking with sellers and negotiating deals.

If, on the other hand, you have a couple of properties and no real desire to expand beyond that, then managing your own properties would be a good way to minimize expenses and maximize NOI.

Depends on your perspective and personal circumstances.